Here is your June Wall Street’s Best Digest issue 842.
Summer is upon us, and I hope you all are making plans to join us at our August 17-19 virtual Summit, entitled Smarter Investing, Greater Profits. You can register here.
The markets are still very bullish, reflected by our barometer, as well as our Market Views section. Energy, of course, is the biggest gainer so far this year. And style-wise, Value Stocks are leading the charge.
The economy continues to strengthen, with manufacturing improving, housing demand continuing to increase, and job creation rising.
Our Spotlight Stock this month is, indeed, sweet—that is, it’s a candy maker! The company made it through the pandemic, broadening its product lines, and showing how it’s managed to survive and prosper for 127 years. My Feature Article provides a bit more industry information, highlighting the continued growth of the confectionary business around the world.
Next, in our Growth section, you’ll find a variety of ideas, from the marijuana, retail, green, and educational sectors. In Growth & Income, our contributors sent recommendations from the chemical, media, food manufacturing, automobile sales, gun manufacturing, and beverage industries.
Our Value ideas feature businesses in the prison and agribusiness arenas. We offer an insurance stock in our Financial Section and a couple of pharmaceutical and medical equipment picks. In Technology, you’ll find a software company, and online platform business, an e-commerce firm, and a semiconductor company.
Our Resources & Energy section are chock-full of midstream, rare earth, precious metals, and utility businesses. And our Low-Priced Stock this month is a company that makes memory products for the computer industry. We also offer sever income ideas in our Preferred Stocks, Income, REITs, and High Yield segment.
Lastly, our Funds & ETFs section includes dividends and healthcare picks.
Please don’t hesitate to send me your feedback and questions. My new address is nancy@financialfreedomfederation.com.
Market Views 842
The Dow and S&P 500 continued to churn just below their respective record highs today, with the former extending its midday losses to clock a 126-point drop. The Nasdaq was able to claw its way out of the red, however, settling with a modest win, as many Big-Tech names strengthened. This mostly muted trading action comes ahead of this Thursday’s Consumer Price Index (CPI) reading, which could sway future Federal Reserve inflation decisions. Meanwhile, a growing number of “meme” stocks remain squarely in the limelight, staging wild swings while the broader market remains relatively quiet.
Gold prices continued to rise on Monday, though they fell just short of the psychologically significant $1,900 yet again. The weakening dollar aided today’s rise, though the 10-year Treasury yield also inched higher, which could put pressure on the precious metal in the near term. August-dated gold rose $6.80, or 0.4%, to settle at $1,898.80 an ounce for the day.
Bernie Schaeffer, Schaeffer’s Investment Research, SchaeffersResearch.com, 800-327-8833, June 7, 2021
Bitcoin ETFs in the Future?
The ETF and mutual fund businesses are looking very closely at all of this, as there’s a line around the corner at the SEC for applications for Bitcoin ETFs. Eventually, we’re all going to see that the demand will not be held back. Most investors want to be able to buy them for their platform accounts, as opposed to a coin-based account.
Tom Lydon, ETF Flows, 2010 Main Street, Suite 1170, Irvine, CA 92614, June 4, 2021
Very Bullish
The technical trend data are overwhelmingly bullish.
As such, my goal is to keep us 100% invested across the board in strong, up-trending stocks and ETFs this week.
However, a market reversal can happen at any time, which is why we keep stops in place in all holdings ... just in case.
Mike Turner, Turner Capital Investments, turnercapital.com, 855-678-8200, June 7, 2021
Spotlight Stock 842
I’m a fan of old-line companies that stay up with the times. The Hershey Company is one such company. While the company remains a confectionary giant, Hershey has expanded its offerings to become a player in the salty snacks industry.
The continued transformation of its product line is helping to drive healthy growth for the firm. Per-share profits and revenues both beat analysts’ estimates in the latest quarter, and the firm upped its revenue and earnings guidance for the year overall.
The stock has behaved well of late in trading around its 52-week high. However, I think investors are only beginning to catch up to the transformation story at Hershey, which means there is plenty of upside ahead for these shares. The stock has a sweet yield and offers a solid “Steady Eddie” selection for investors needing exposure to the consumer-products sector.
Hershey’s stable of confectionary brands is well known. The firm’s namesake chocolate products are sold all over the world. Other popular brands in the confectionary area include KitKat, Reese’s, Ice Breakers, Jolly Rancher, and Twizzlers. What might surprise some readers are the company’s brands in the salty snack area, which include Pirate’s Booty and SkinnyPop. Salty snacks business was up a solid 10% so far this year, led by market-share gains in SkinnyPop.
Overall, Hershey posted revenue growth of nearly 13% in the quarter. Strong North American business and continued recovery in international business helped fuel the gains. The company concedes that it will be challenging to maintain that double-digit growth rate. Some of the company’s brands have benefited from the stockpiling that has occurred during Covid lockdowns. However, increased mobility will help some of the company’s products, particularly those that sell well in convenience stores and restaurants and are prominent fixtures at family gatherings, parties, and schools.
For 2021 overall, the firm is looking for revenue growth in the 4% to 6% range, up from previous guidance of 2% to 4%. Earnings per share are expected to be in the range of $6.79 to $6.92, an 8% to 10% increase over 2020 results.
Long term, I expect further transformation of the company’s product line, paced by strategic product divestitures, organic product development, and acquisitions. Continued earnings gains should spark higher dividends.
The firm raised the dividend 4% last year, and I expect a dividend hike at least matching 4% in the second half of this year.
I grew up about 20 minutes from Hershey’s headquarters and made many trips to the company’s factories and entertainment complexes. The firm operates a theme park as well as a sports center in its hometown. So, I’ve always been an admirer of the company products. There have been times, however, when I have been less of a fan of the stock. However, Hershey is making me a believer, and I think the stock is worth a bite at these levels.
Please note Hershey offers a direct purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $250.
The Hershey Company, 19 East Chocolate Avenue, Hershey, PA 17033, (717) 534-4200, (800) 851-4216, http://www.thehersheycompany.com
Initial shares can be purchased directly from the company ($250 minimum or automatic monthly investments of at least $25 for 10 consecutive months).
- Partial dividend reinvestment is available.
- OCP (optional common share purchase): $25 to $250,000 per year
- Purchasing costs are $5 plus 6 cents per share.
- Selling costs are $15 plus 12 cents per share.
- Automatic investment services are available. $3.50 (one-time) or $2 (recurring) ACH fee plus 6 cents per share.
- Dividends are paid March, June, September, and December.
- Performance Rating: * * * * (Out of 5 stars)
Charles B. Carlson, CFA, DRIP Investor, dripinvestor.com, 800-233-5922, June 2021
The Hershey Company (HSY) 52-Week Low/High: $2125.50 - 175.55 | Why Hershey:
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Feature Article 842
Mmmm! I don’t often get to write about something that tastes good—like the products of our Spotlight Stock, The Hershey Company (HSY). So, I’m going to enjoy this opportunity!
The company’s founder, Milton Hershey, apprenticed for four years with a confectioner before starting his first candy company. His first two efforts as an entrepreneur failed, but his third try in 1894 became Hershey. And, as they say, “the rest is history.”
Today, Hershey is one of the world’s leading confectioners, in a global market of $210.3 billion. According to Alllied Market Research, that market is forecast to reach $270.5 billion by 2027. Chocolate—of course—claims the largest market share—about 35.2%.
In the U.S., we chocolate lovers have pushed sales of confectionaries to $295.9 million.
Globally, we each consume about $185 of sweets annually, according to Statista.com. I don’t know about you, but I’m doing my part to keep those numbers rising!
COVID-19 hurt candy makers, who saw event cancellations, as well as production interruptions due to new coronavirus protocols. Mitigating the impact of the pandemic, however, was the fact that more people were at home, and home baking and consumption of snacks increased. And like many other businesses, confectioners also saw a rise in e-commerce sales. Hershey certainly did; the company noted that digital sales in March 2020 were 80% of the company’s entire yearly projection for e-commerce!
Now, Hershey is tackling the post-COVID world, seeking to grow its company and product lines, both internally and by acquisition. The company just announced that it will buy the better-for-you (BFY) confectionery brand Lily’s, a maker of low-sugar chocolate products.
The deal confirms Hershey’s strategy to offer more reduced-sugar, organic-based alternatives. And, best of all, the transaction is estimated to actually be accretive to Hershey’s earnings in the first full year post the closing of the deal.
The brand is strong, momentum is increasing, especially in North America, and that enabled Hershey to beat analysts’ estimates on both the top and bottom lines in the first quarter. Hersheys continues to invest in advertising, in-store merchandising and programming and innovations, such as Kit Kat Thins and Zero Sugar products.
All in all, it looks like it’s a good time to be “sweet” on Hershey.
Growth 842
Trulieve Cannabis Corp. (TRUL.CN, TCNNF)| Daily Alert May 24
Trulieve Cannabis Corp. is a vertically integrated cannabis company which operates under licenses in six states including Florida, Massachusetts, California, Connecticut, Pennsylvania, and West Virginia. It cultivates, produces, and sells medicinal-use and recreational cannabis products within these states. Of the six states, only California and Massachusetts allow both the sale of medical and recreational cannabis.
On May 10, Trulieve and Harvest Health & Recreation Inc. announced they entered into a definitive agreement through which Trulieve will acquire all of the shares of Harvest for stock of Trulieve, representing total consideration of approximately $2.1 billion. This is a good deal for Trulieve.
Based on the midpoint of management’s forward fiscal 2021 EBITDA guidance of $365 million, TRUL is trading at under 13 times forward EBITDA. And based on the company’s trailing EBITDA of $255.6 million, the company is currently trading at 17.5 times trailing EV/EBITDA.
If TRUL is able to meet management’s fiscal 2021 guidance of $365 million, and trade with a justified EV/EBITDA multiple of just 16.5 times—relatively conservative compared to its current trailing figure—we estimate fair value for the stock over the mid term to be approximately C$62 per share. Buy.
Ryan Irvine in Gordon Pape’s Internet Wealth Builder, buildingwealth.ca, 1-888-287-8229, May 17, 2021
Dollar Tree, Inc. (DLTR) | Daily Alert June 4
P/E Growth: Peter Lynch
Dollar Tree, Inc. is an operator of discount variety stores. Its segments include Dollar Tree and Family Dollar.
DLTR is considered a “True Stalwart,” according to this methodology, as its earnings growth of 18.24% lies within a moderate 10%-19% range and its annual sales of $25,702 million are greater than the multi-billion-dollar level. This methodology looks for the “Stalwart” securities to gain 30%-50% in value over a two-year period if they can be purchased at an attractive price based on the P/E to Growth ratio. DLTR is attractive if DLTR can hold its own during a recession.
YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: PASS
The Yield-adjusted P/E/G ratio for DLTR (0.86), based on the average of the 3-, 4- and 5- year historical eps growth rates, is O.K.
EARNINGS PER SHARE: PASS
The EPS for a stalwart company must be positive. DLTR’s EPS ($6.22) would satisfy this criterion.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for DLTR (43.55%) to be normal (equity is approximately twice debt).
John Reese, Validea Hot List Newsletter, validea.com, 877-439-0506, May 28, 2021
*Darling Ingredients Inc. (DAR)
Darling recovers and converts recycled oils (used cooking oil and animal fats) into valuable renewable diesel fuel. Darling also provides environmental services, such as grease trap collection and disposal services to food service establishments.
In fiscal year 2020, Darling generated $3.6 billion in revenues and $327 million in net income attributable to Darling.
There’s a 400 million gallon per year expansion at Norco (costing $1.1 billion), which represents an increase of 137%, and is on track to begin production in the middle of Q4 of 2021. So that will give EPS quite a boost in 2022 and then a second capacity expansion, this one taking place in Port Arthur, is expected to add another 470 million gallons and be operational by H2 2023, giving 2023 and 2024 a further boost.
The company is conservatively saying that with the Q1 EBITDA margin of $2.77/gallon in Q1, it now projects $2.20 - $2.40 margin for all of 2021. Analysts see EPS growing 76% this year to $3.45 and to $4.75 in 2022, but they have estimated too low by an average of 31% in the past 4 quarters.
Zacks gives DAR a 2 ranking, the IBD composite is 93 and the BI Rank is a strong 10.9- Buy.
Tom Bishop, BI Research, biresearch.com, June 2021
*Bright Horizons Family Solutions Inc. (BFAM)
Bright Horizons Family Solutions is one of the nation’s largest networks of childcare services and a return to normal means a return of customers.
But the future looks even more promising than the pre-pandemic past.
About three-fourths of households with kids are scared of the damage the pandemic may have done to their child’s development. And most of them—as concerned parents—are actively looking for ways to undo that damage.
Which brings us back around to Bright Horizons. It’s a childcare and extended education company that’s about to have its greatest year ever. The biggest piece of Bright Horizon’s pie is day care, after school care, and extended education.
With its core services actively addressing the biggest parental worries caused by the pandemic—not to mention ordinary demand backed up by a year of isolation—there might not be a stock I’d rather own today.
Ian Wyatt and Ryan Cole, Ian Wyatt’s Million Dollar Portfolio, wyattresearch.com, May 28, 2021
Growth & Income 842
Cabot Corporation (CBT)| Daily Alert May 25
One of Cabot Corporation’s key growth end markets is material used to make lithium-ion batteries. It sells carbon nanostructures, fumed metal oxides and conductive carbon black to battery manufacturers. Its chemicals are key enablers of increased battery performance. They create electrically conductive connections between battery layers. This enables faster charging, greater energy density and extended ranges and all of these are vital qualities needed for EV batteries. That makes it a one-stop shopping deal for battery manufacturers.
The future prospects for Cabot look very promising. The market for conductive carbon additives alone is expected to grow by $1 billion by 2025. Cabot reported adjusted earnings per share for its second quarter that were up a record 79% year over year to $1.38, from $0.77 year over year. Pre-tax earnings in materials increased 46% year over year to a record high of $89 million.
For fiscal 2021, Cabot projects earnings per share of $4.95, meaning that the stock is trading at just over 12 times forward earnings. In addition to a healthy balance sheet, Cabot also has a dividend yield of more than 2%. The stock is an effective hedge against inflation, and a play on economic recovery with exposure to the lithium-ion battery sector.
BUY A HALF
Carl Delfeld, Cabot Explorer, cabotwealth.com, 978-745-5532, May 13, 2021
Nexstar Media Group, Inc. (NXST)| Daily Alert June 1
Nexstar Media Group is the largest owner of local television stations in the U.S. The company owns, operates, programs, or provides services to 198 television stations covering approximately 60% of U.S. television households. Most of the company’s station portfolio is comprised of network affiliates of the big four networks: ABC, CBS, Fox, and NBC.
Historically, the company’s primary source of revenue had been the sale of commercial airtime to local and national advertisers, providing more than two-thirds of the company’s revenue a decade ago. Since then, retransmission revenue collected from cable and satellite companies in return for the consent to retransmit the signals from Nexstar’s television stations has grown significantly, stabilizing results. Retransmission revenue accounted for nearly 50% of Nexstar’s revenue in the past year.
On the back of continued growth in retransmission revenue, strong political advertising tailwinds, and share repurchases, we anticipate Nexstar will be able to grow earnings 10% annually over the next five years. This implies EPS of $27.97 at the end of this period. Applying a high P/E of 15.0, we get a potential high price of 419. Using a low P/E of 8.0 combined with a downside scenario where the trends in retransmission revenue do not hold up and EPS reaches a low of $12.00 results in a price of 96. Therefore, we model an upside/downside ratio of 5.2 to 1 and a projected high return of nearly 25% annually.
Doug Gerlach, InvestorAdvisoryService.com, 1-877-33-ICLUB, May 25, 2021
Mondelez International, Inc. (MDLZ) | Daily Alert June 7
Mondelez International, Inc. (Rated “B”) is the global snack food company responsible for familiar brands like belVita Breakfast Biscuits, Philadelphia Cream Cheese, Oreo Cookies and Ritz Crackers. It also sells foreign market products you may have encountered on your travels, including Prince biscuits and Alpen Gold chocolate.
Late last month, shares of MDLZ broke out of a 15-month trading range to the upside. Specifically, sales rose 8% to $7.2 billion on the back of strong global snack food sales. Adjusted earnings per share (EPS) also rose 11%.
The firm continues to grow by acquisition. It bought the rest of the U.S. firm Hu Master Holdings in January, a majority stake in the U.K. company Lion/Gemstone Topco Ltd. in March, and the Australian company Gourmet Food Holdings Pty Ltd in April.
Nor did MDLZ lose the “Buy” grade our Weiss Ratings system has bestowed on it for more than two years. The company also continues to buy back its own shares, including more than $1 billion in the most recent quarter.
All of those factors helped vault MDLZ to the top of my Bedrock Income Portfolio screening system this month. Buy a 2.5% position in Mondelez International, Inc. (MDLZ, Rated “B”) at the market.
Mike Larson, Safe Money Report, 1-877-934-7778, weissratings.com, May 2021
AutoNation, Inc. (AN) | Daily Alert June 8
AutoNation’s operating profit margin expanded to 4.8% in 2020, its highest level since 1993.
In the March quarter, AutoNation pried operating profit margins wider to 5.7%, versus 3.5% in the year-ago quarter and higher than any quarter since 1997. Management attributes its higher profitability to cost discipline, improvements in its digital business, and higher vehicle prices.
With vehicle supplies limited in many parts of the country, AutoNation is not budging much on the sticker price of new cars. AutoNation has shown more willingness to negotiate on prices for used cars, which can be more easily replaced in its inventory.
Encouragingly, management says vehicle demand remains significant and sustainable, which should help protect operating profit margins in coming quarters. Analysts expect per-share profits to grow 42% in 2021 on 16% higher revenue.
AutoNation is a Best Buy.
Richard J. Moroney, CFA, Upside, upside stocks.com, 800-233-5922, June 2021
*Smith & Wesson Brands, Inc. (SWBI)
Smith & Wesson Brands is the maker of some of the world’s most popular pistols, revolvers and rifles and has seen bullseye earnings growth, but it also is seeing a big run higher in its share price.
This recent breakout move is what we’ve been waiting for to add SWBI to our portfolio. Now, the stock is breaking out of a bullish cup-with-handle technical pattern.
Let’s buy Smith & Wesson Brands at market. Set a protective stop at $15.95.
For those willing to make a bigger bet, we recommend buying the SWBI Sept. $22.50 call options (SWBI210917C00022500) at market. The call options last traded for $1.40 and expire on Sept. 17.
Mark Skousen & Jim Woods, FMA Trader Alert, markskousen.com, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, May 24, 2021
*The Coca-Cola Company (KO)
Coca-Cola, originally recommended by Bruce Kaser for the Growth/Income Portfolio of Cabot Undervalued Stocks Advisor, continues to work on breaking out above 55, the level that has acted as resistance three times since November. In his latest update, Bruce wrote, “The company is discontinuing its Coca-Cola Energy drink – once considered promising but now being cut as sales have been lackluster. We view this as a positive, as the company is more aggressively weeding out its weaker products.
“While the valuation is not statistically cheap, at 25.0x estimated 2021 earnings of $2.18 (unchanged in the past week) and 23.1x estimated 2022 earnings of $2.36 (unchanged), the shares remain undervalued given the company’s future earning power and valuable franchise.” BUY
Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, May 24, 2021
Value 842
*CoreCivic, Inc. (CXW)
CoreCivic is the largest private owner/operator of corrections and detention facilities in the country, with over 70,000 beds in 47 facilities, as well as 26 residential reentry centers and 15 other properties.
While CoreCivic has historically generated steady profits, it is increasingly controversial. A class-action lawsuit alleging misleading statements by the company (then named Corrections Corporation of America) in 2016 remains a cloud. President Biden’s executive order on January 26 banning the Department of Justice from renewing private prison contracts capped years of earlier steps in that direction, threatening at least 23% of CoreCivic’s revenues. Adding to its difficulties, the pandemic has led to reductions in its population.
As a real estate investment trust, Core Civic required capital market access to fund its growth, but skeptical investors constrained this access. In response, the company converted to a taxable corporation in January. The shares have declined 80% from their 2014 peak and trade at long-time lows.
However, at least one savvy investor, Michael Burry, of Scion Asset Management and The Big Short fame, raised his position to 1% of the company’s market cap. What he may see is that CoreCivic appears sharply undervalued on a per-bed asset basis, there may not be many alternative locations for federal incarcerations, and the company is aggressively shoring up its balance sheet. CXW shares carry considerable risk and social taint but appear to offer sharp upside potential if conditions turn in the company’s favor.
Bruce Kaser, Cabot Turnaround Letter, cabotwealth.com, 978-745-5532, May 26, 2021
*Bunge Limited (BG)
Bunge operates through five segments: agribusiness, edible oil products, milling products, fertilizer, and sugar and bioenergy. And we’re interested in all five because they’ve all got some serious catalysts coming down the pike.
In its most recent quarter, the company posted results more than 100% higher than analysts were expecting.
Price appreciation is likely only going to gain steam as the Fed tries to ride the line between spurring runaway inflation and causing a market correction. The major players have signaled that neither spending nor easing is going away soon.
And that’s a perfect storm for inflation to sneak up and bite them in the you-know-what. So. before things get too much more out of hand, we need to position ourselves in a stock that should benefit from whatever the next few months and years have in store.
Bunge provides products people use every day and need to survive. That’s not something you stop buying because it gets a little more expensive. So as inflation grows, so will Bunge’s profits.
And if we’re wrong and inflation remains in check, Bunge will still be a profitable company providing products everyone needs. And it’ll still pay out a nice quarterly distribution to cushion our accounts with income.
Bunge Limited is a buy under $95. The 12-month target will start at $125.
Jason Williams, The Wealth Advisory, www.angelpub.com, 877-303-4529, May 2021
Financials 842
The Allstate Corporation (ALL)| Daily Alert June 9
Allstate is the largest publicly traded personal lines insurance company in the U.S., primarily a direct writer of a full array of property and casualty products like auto and home insurance. Allstate has mildly reshaped some of its portfolio over the past year, spending $4 billion to acquire National General in 2020 and selling 80% of its life insurance business to Blackstone for $2.8 billion.
These moves seem logical given ALL’s competitive position within property and casualty insurance. And while the life insurance sale involved a $4 billion write-down in Q1, we think the long-dated nature of life insurance liabilities offset any diversification benefits. Despite issuing rebates to customers as traffic came to a halt last year, the loss ratio improved over 7% in Q1 to 83.3, although we expect this to normalize a bit going forward.
We still find the stock a solid value, trading for just 11 times NTM EPS estimates, with a nice dividend yield and a propensity to repurchase shares. Also of note is the passive stake (1% of outstanding shares) disclosed by prominent investor Carl Icahn. Allstate boasts a vast distribution network, scale and resulting cost advantages, and pricing sophistication.
John Buckingham, The Prudent Speculator, theprudentspeculator.com, 877-817-4394, June 2, 2021
Healthcare 842
*Amgen Inc. (AMGN)
Amgen gapped down on some bad news and snapped right back—just what we like to see. Right now, AMGN sells for about 15-16 times earnings and less than 12 times cash flow. There is a lot of pessimism about the stock, but that means opportunity here—for income or conservative growth. With all the bad vibes about, it is encouraging to see AMGN shrug off the bad news after the sell-off and bounce right back, and now it is moving back toward the highs. A good dividend, which will rise, and a good future, A+ outfit—a buy up to $260.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, May 18, 2021
*Cerner Corp. (CERN)
Cerner performed well in the first quarter, beating the consensus earnings estimate and growing bookings by 13% year over year. Management expects earnings growth of at least 13% in 2021, up from its earlier estimate of 9%-13% growth. We are boosting our 2021 EPS estimate to $3.25 from $3.20. Our revised estimate assumes growth of 14% for the year. We are also raising our 2022 forecast to $3.65 from $3.60, implying 12% growth from our 2021 estimate.
CERN trades at 24-times our 2021 EPS estimate, below the average of 29 for a healthcare services peer group. Our revised target price of $85, raised from $80, assumes a projected 2021 P/E of 26, still below the peer average, and a potential return of 12% including the dividend.
Jim Kelleher, CFA, Argus Weekly Staff Report, argusresearch.com, 212-425-7500, May 28
*Becton, Dickinson and Company (BDX)
Becton, Dickinson & Company is a global leader in the medical supply industry. The company was founded in 1897 and has grown into an industry giant that operates in 190 countries. The company generates more than $19 billion in annual revenue, with approximately 45% of revenues coming from outside the United States.
Today, BDX operates three segments: Medical Devices, Life Sciences, and Intervention.
BDX showed balanced growth across its geographic markets. The U.S. grew 1.9%, while international markets revenue grew 26%. On the bottom line, BDX’s adjusted earnings per share increased 25% to $3.19 for the quarter.
Along with providing quarterly financial results, the company reaffirmed its guidance for fiscal 2021. BDX management expects adjusted EPS in a range of $12.75 to $12.85. Revenue is projected to grow 10% to 12% for fiscal 2021, on a currency-neutral basis.
Of the company’s 26% international revenue growth, developed nations grew 10% while emerging markets revenue increased by 24%, including 62% growth in China.
BDX spends over $1 billion each year on research and development to further entrench itself as a market leader. This investment in R&D has paid off for the company, as BDX now has over 27,000 active patents and manufactures over 40 billion devices each year.
We expect BDX to generate total returns of 10.9% per year over the next five years. This is a strong expected rate of return, particularly for a steady blue chip dividend stock. As a result, we view BDX stock as a buy for dividend growth investors looking for high total returns.
Ben Reynolds, Sure Dividend Newsletter, suredividend.com, support@suredividend.com, 800-531-0465, May 24, 2021
Privia Health Group, Inc. (PRVA)| Daily Alert May 30
We initiate coverage of Privia with a BUY and $47 PT. Privia is a leader in primary care and physician practice management. Privia’s offering includes a comprehensive technology platform and a strong physician governance structure that helps drive physician practice optimization.
Unlike many other primary care companies, Privia has an asset-light operating model with minimal start-up costs associated with its growth strategy. The company is already profitable given physicians added to the platform typically have a ramped patient panel. Privia is not limited to any one specialty, payer, or reimbursement model. Currently, ~90% of Privia’s business is fee-for-service, and while Privia helps optimize FFS, the company is also focused on shifting to value. This attractive business model is expected to deliver impressive long-term growth (20%+ top-line) and margin (30-35% adj-EBITDA) targets.
We are initiating coverage with a $47 price target, which is based on 3.4x our 2022 adjusted EBITDA estimate. This implies a ~20-25% discount to a peer group of healthcare services companies that currently trades at 4.3x.
Richard Close and Brian Hoffman, Canaccord Genuity Research, canaccordgenuity.com, May 24, 2021
Technology 842
Adobe Inc. (ADBE)| Daily Alert June 2
Adobe Inc. is a buy. The company (Aggressive Growth Portfolio; TSINetwork Rating: Average) makes software that lets computer users create, edit, and share documents in the popular PDF format. It also makes a variety of electronic-publishing programs.
Adobe’s decision a few years ago to switch to selling its programs as ongoing subscriptions instead of one-time purchases continues to pay off for its investors: In the quarter ended March 5, 2021, revenue rose 26.3%, to a record $3.91 billion from $3.09 billion. Earnings jumped 38.3%, to $3.14 a share from $2.27.
Meantime, Adobe keeps making key acquisitions to move into new areas and broaden the computer applications available to customers. For instance, in November 2018, the company bought marketing-automation firm Marketo for $4.75 billion. It helps brands track their customers’ actions online, from the time they get an email to the time they purchase a product. It then provides those brands with that information, which they then use to create more-personalized promotions.
In addition to making acquisitions to drive investor gains, Adobe spends a high 18% of its sales on research. The company’s balance sheet is also very strong: Adobe holds cash of $5.0 billion and its long-term debt is just $4.1 billion.
The stock trades at 42.7 times the projected fiscal 2021 earnings of $11.88 a share. That’s an acceptable multiple as more people rely on Adobe’s products to work remotely due to COVID-19. The company’s also free from the kind of global supply chain disruptions that the virus has caused manufacturers.
Adobe Systems is a buy.
Patrick McKeough, Wall Street Stock Forecaster, www.tsinetwork.ca, 888-292-0296, June 2021
*Squarespace, Inc. (SQSP)
52wk H. 55.88 52wk L. 42.82
Mkt Cap: $7.16B, EPS, P/E, Beta: N/A
The operator of a platform to build online presence in its IPO bypassing traditional Wall Street, went public through direct listing. A major achievement to convince investors in the present marketplace vs. other companies who postponed their IPO debut. The technical picture has not matured as yet. Volatile.
BUYING RANGE: 48-55
NR TERM OBJ: 63
INTERMED OBJ: 78
STOP LOSS: 39
Joseph Parnes, Shortex Market Letter, shortex.com, 800-877-6555, June 2021
*Alibaba Group Holding Limited (BABA)
Select Chinese based companies are trading at depressed valuations that currently offer investors long-term turnaround potential, similar to energy late last year.
For investors with limited exposure in China we would accumulate Alibaba into weakness.
Alan B. Lancz, The Lancz Letter, www.lanczglobal.com, 419-536-5200, May 27, 2021
*Applied Materials, Inc. (AMAT)
Thanks to the digital transformation, there will always be great plays in tech.
And that brings me to the incredible opportunity in semiconductors that investors need to know about. Microprocessors are an extremely important part of digital transformation, yet not all silicon companies are the same.
One of the most prominent companies in this area is Applied Materials, Inc. It reported second-quarter earnings on May 20 that blew past expectations. Managers said Q3 revenues would be up 35% year over year and that revenue momentum is building as big buyers like Taiwan Semiconductor (TSM) and Intel Corp. (INTC) feverishly retool to meet rising demand.
Keep in mind that Applied Materials is the world’s largest supplier of equipment. Its wafers and materials are used in every aspect of the manufacturing process except lithography.
Business is booming. More importantly, based on the price action since February, we know the constituency for Applied Materials shares look very solid.
Savvy investors should strongly consider buying shares into any near-team weakness.
Jon Markman, Pivotal Point, issues@e.moneyandmarkets.com, 1-800-291-8545, May 28, 2021
Resources & Energy 842
ONEOK, Inc. (OKE)| Daily Alert June 3
ONEOK, Inc. is a large-cap energy midstream company that will pay an attractive yield and growing dividends for years. Even though energy stocks have posted great gains so far in 2021, OKE still yields just over 7%. Also, the share price was $20 higher before the pandemic triggered a crash of the energy sector.
ONEOK should be part of your overall income portfolio investment plan. If you don’t own any yet, pick up some shares. If you are underweight this stock, add a few shares.
Before the pandemic, ONEOK increased the dividend every quarter, with the payout growing by about 10% per year. I hope the company soon returns to a dividend growth plan. That move would help propel the stock price even higher. The next dividend announcement comes in July.
Recommendation: Buy or Add shares of OKE up to $57.50, which locks in a minimum 6.5% yield.
Tim Plaehn, The Dividend Hunter, yn345.isrefer.com/go/cabmdpc/cab/, May 25, 2021
*Lynas Rare Earths Limited (LYSCF)
Lynas is the one of the only producers of scale of separated rare earths outside of China and the second largest in the world.
Governments all over the world are moving toward electric vehicles, and renewables. Many want far more electric vehicles on the road. In fact, here in the U.S., California Gov. Newsom signed an executive order that will ban the sale of gas-powered passenger cars in the state starting in 2035. We’re even moving towards a greener future with solar and wind.
However, for that to happen, many must also have reliable access to rare earth metals. Unfortunately, many countries are running into a severe problem. Nearly all rare earth comes from China, which has proven to be unstable. Worse, China has announced tougher regulations over the rare earth industry, from mining to exports.
As the world races to secure rare earth outside of China, Lynas could benefit.
Ian Cooper, The Cheap Investor, support@thecheapinvestor.com, June 2021
*MPLX LP (MPLX)
MPLX LP is a midstream partnership that’s 62.88% owned by Marathon Petroleum (MPC) that has rallied almost to our highest recommended entry point of 30 this month. That follows the release of very strong Q1 results, including $1.1 billion in net cash generated by operating activities.
The contract-based Logistics and Storage business saw flat income from operations and a 2.8% lift in EBITDA. Gathering and Processing EBITDA increased 8.1%. That was despite a -12% decrease in gathered volumes and -5% lower processing volumes, partly offset by 1% higher fractionated volumes. In the key Marcellus region of Appalachia, the company’s gathered volumes declined by -9% but processed and fractionated volumes rose by 3% and 7%, respectively. That’s promising going forward, even as the company remains on track to bring three major pipeline projects into service by the end of 2021 linking the Permian Basin of Texas with the Gulf Coast.
Cash flow from these new assets should greatly offset the continuing impact on system volumes of weakness in other regions such as the Bakken and the Rockies, as producers focus on generating free cash flow over output. At the end of the day, MPLX’s fate is directly tied to Marathon’s, including the latter’s eventual decision on whether to continue to own the unit or possibly convert it to a C-Corp from MLP structure. But whatever happens, the parent’s recent decision to swap incentive distribution rights for ordinary shares should closely align its interests with those of other unitholders as far as taxation goes. Meanwhile, the partnership continues to prove its resilience by renewing contracts. Buy up to 30.
Elliott H. Gue and Roger S. Conrad, Energy Income Advisor, www.energyandincomeadvisor.com, May 25, 2021
*Wheaton Precious Metals Corp. (WPM)
Wheaton Precious Metals reported record quarterly revenues for the first quarter of the year. Although its “gold equivalent” sales fell 1.9% from the previous quarter (though up 5.6% from a year ago), its attributable production was nearly 8% more than sales, due to delays in cobalt deliveries from the Salobo mine, the first quarter of cobalt deliveries.
Although the gold price fell in the quarter, the realized price of silver and palladium both increased, more than offsetting the gold price decline. Similarly, gold sales fell by 13% while silver sales jumped 45%. Overall, Wheaton’s revenues increased, by 13% relative to the prior quarter and by 27% compared with a year ago…
Wheaton now is essentially debt free, with over $2 billion in available liquidity. Santo Domingo, a long-life copper mine in Chile, is expected to commence production in 2024, generating about 35,000 ounces per year for the first five years. This is the third small stream acquired by Wheaton over the past six months, for a total of $550 million.
Compared with other major royalty companies, it is undervalued. If you are underweighted in the sector, Wheaton would be the top buy now.
Adrian Day, Adrian Day’s Global Analyst, adriandayglobalanalyst.com, 410-224-8885, May 9, 2021
*Exelon Corporation (EXC)
Outside of fallout from Winter Storm Uri and Texas’ market dysfunction, there wasn’t much evidence of operating cost pressures in Q1 for most coverage universe companies. In fact, most are still selling bonds with coupon rates near multi-generation lows, including in the fast-growing green debt market. Some utilities have actually received an earnings benefit from rising interest rates and inflation. Illinois, for example, automatically resets companies’ allowed returns on equity based on the 30-year Treasury bond rate, giving a boost to results for regulated utilities Exelon Corp (EXC). Exelon is still a buy up to 48.
Roger Conrad, Conrad’s Utility Investor, www.ConradsUtilityInvestor.com, 888-960-2759, May 31, 2021
Low-Priced Stocks 842
*Everspin Technologies, Inc. (MRAM)
Everspin Technologies provides magnetoresistive randomaccess memory products, including Toggle MRAM and Spin-transfer Torque MRAM. Utilizing this technology, Everspin is able to deliver products that have superior performance and incredible reliability in non-volatile memories—even against total power loss.
Its sales revenue comes from its MRAM-based products as well as licenses of and royalties on its MRAM and magnetic sensor technology. The company is the leading provider of MRAM technology to critical data center, industrial, and internet of things (IoT) end-point applications.
In fact, Everspin has built up a base of over 1,300 customers over the last 12 years and has shipped more than 120 million of its MRAM units.
And as the 5G rollout continues to build serious momentum over the next year, the potential for Everspin’s MRAM products will be unprecedented.
The next step for Everspin is to increase its sustainable cash flow from operations, which will help deliver future growth and bolster its critical R&D programs.
We plan on riding this growth and remain wildly bullish on the long-term investment horizon for Everspin Technologies.
We rate Everspin Technologies a “Buy” under $8.50. The risk level is “Medium.”
Keith Kohl, Technology & Opportunity, angelpub.com, 877-303-4529, May 2021
Preferred Stocks, Income, REITs, & High Yield 842
Public Storage (PSA-PK)| Daily Alert May 20
Public Storage, Inc. 4.75% Fixed Rate, Cumulative Preferred; Par 25.00; Call Date 12/20/24; Yield to Call 1.62%; Pay Cycle 3e; Exchange NYSE; Ratings, Moody’s A3, S&P BBB+; CUSIP 74460W578
Public Storage, Inc. (PSA) is a real estate investment trust (REIT) and the world’s largest owner and operator of self-storage facilities. Based in Glendale, California, the company has thousands of locations across the U.S. and Europe, with more than 170 million net rentable square feet of properties.
The REIT has demonstrated strong but conservative growth, with moderate debt leverage. Earnings and profitability measures have been sound, as confirmed by PSA’s solid credit ratings.
The public storage sector has largely escaped the major challenges posed by the pandemic and the economic downturn during 2020 and early this year. PSA reported 4Q 2020 funds from operations of $449.3 million or $2.57 per share. Core or adjusted funds from operations (AFFO) totaled $2.93 per share, beating analysts’ $2.85 estimates. AFFO benefited from improved occupancy and a modest increase in net operating income (NOI) from the prior-year 4Q period.
Square foot occupancy was 95.2% as of 12/31/20, up from 93.1% on 12/31/19, while NOI rose 1.3%. This preferred is fixed rate and callable on or after 12/20/24. Dividends are taxed as ordinary income, given the REIT’s tax status.
This issue’s solid investment grade ratings—plus PSA’s strong credit metrics—make it a suitable investment for low-risk tax-deferred portfolios. Buy at $28.00 or below for 1.37% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, May 2021
*Pizza Pizza Royalty Corp. (PZA.TO)
Pizza restaurant chain Pizza Pizza has not been as big a beneficiary of the lockdowns due to the COVID-19 pandemic as might have been expected. While the share price is up 28% over the last year, it is still down over the last five years.
Same store sales growth (SSSG), or revenues from restaurants that have been open for at least 12 months (which is regarded as the most important performance metric), fell 12.5% in 2020, with the 645 Pizza Pizza outlets in Ontario and Eastern Canada down 13.4% and the 104 Pizza 73 outlets in Alberta down 8.1%. With 23 restaurants closing in 2020, total sales fell 11.8%, to $488.3 million. Competition from restaurant delivery apps such as DoorDash and Skipthedishes has hurt Pizza Pizza sales, but more important is the closure of its outlets in entertainment and sporting venues and the absence of on-premise dining.
Despite SSSG falling 13.3% in the first quarter due to the renewed lockdowns in Ontario and Alberta, the share price is actually up 15% this year, and management raised the payout by 10%, to $0.066 a month.
With the vaccination program rolling out, and with declines in SSSG having stabilized around 13%-14%, Pizza Pizza seems to have weathered the most severe crisis it is likely to face. With a payout ratio of 84%, the dividend is sustainable, and the stock becomes a Buy as a play on recovery from the pandemic, with some protection from its high yield.
Gavin Graham in Gordon Pape’s Income Investor, buildingwealth.ca, 1-888-287-8229, May 27, 2021
Hanesbrands Inc. (HBI)| Daily Alert May 21
Winston-Salem, N.C.-based Hanesbrands designs, manufactures and sells innerwear and activewear apparel worldwide. Products include underwear, socks, T-shirts, sweatshirts, and bras. Brands include Hanes, Champion, Bonds, Maidenform, DIM, Bali, Playtex, Bras N Things, L’eggs, Just My Size, and Wonderbra.
The company on Tuesday reported quarterly revenue and profit that topped analysts’ estimates, but the stock fell more than 14% at one point because management offered lower sales and earnings guidance for the rest of the year. The company expects 2021 adjusted earnings of $1.51 to $1.59 per share, and sales of $6.2 billion to $6.3 billion, compared to Wall Street’s forecast for EPS of $1.61 and sales of $6.71 billion. Management outlined a three-year growth strategy for its Champion brand that it says should add increase compound annual sales growth by 6% per year through 2024.
Revenue in the most recent quarter grew 25.4% from one year ago, and over the past 12 months, sales have totaled $6.86 billion. Hanesbrands generated $1.43 in free cash flow per share over the past 12 months, which is comfortably higher than $0.60 in annual dividends.
Stock purchases by insiders buttress the bullish case on Hanesbrands. A member of the board of directors and a division president bought more than $350,000 worth of company stock on Thursday.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, May 14, 2021
Preferred Apartment Communities, Inc. (APTS)| Daily Alert May 28
Preferred Apartment Communities isn’t quite what the name seems. The REIT, which owns 117 properties in 13 states—primarily in the Sun Belt—does specialize in Class A multifamily properties. But it also deals in grocery-anchored shopping centers, as well as Class A office buildings.
As you’d guess from the portfolio, APTS has struggled mightily ever since COVID spread across the States. Over the past four quarters, Preferred Apartment’s “core” funds from operations (FFO, an important measurement of REIT profitability) has dropped by between 11% and 42%, depending on the quarter.
Management saw the writing on the wall early on, electing to cut the dividend by 33%, to 17.5 cents per share, as of its June 2020 payout.
Preferred Apartment Communities is paring down what could be the weakest link of its portfolio going forward: office buildings. In mid-April, the company said it would sell off seven office properties and an office real estate loan to Highwoods Properties (HIW) for $717.5 million.
The transaction will allow APTS to focus on two property types instead of three, with plans to continue growing its Class A suburban multifamily portfolio. The company also expects to redeem some of its preferred shares.
The immediate downside is a drag on Core FFO, with the company reducing its 2021 guidance from a range of 81 to 89 cents per share to a range of 73 to 83 cents per share. However, the company notes that “this may be offset to some extent based on the use of the proceeds, the timing of redeployment of proceeds, and G&A savings.” More important to us, however, is even at this lower guidance, APTS shares are trading at just about 12 times expected FFO—a fairly reasonable price for a 7%-plus yield.
And prior to COVID, Preferred Apartment Communities was a rare bird in that it upped its payouts every six months, rather than every year. Management has some difficult waters to navigate for now, but they have investor income in mind, and that the payout will resume its growth as finances allow.
Brett Owens, Contrarian Outlook, BNK Invest Inc., 500 North Broadway, Suite 265, Jericho, NY 11753 USA, 516-620-4294, May 21, 2021
Funds & ETFs 842
Schwab U.S. Dividend Equity ETF (SCHD)| Daily Alert May 26
Schwab U.S. Dividend Equity is being added to our recommended Growth and Conservative portfolios with a 6% target weight. It mirrors an index designed by Horizon Investment Services, a sister company of Horizon Publishing, which earns a fee based on its asset size.
Holding nearly 100 stocks, the ETF favors high-quality companies with sustainable dividends. Financials represent 22% of the portfolio, followed by industrials at 18%. The ETF ranks among the top 3% of its peer group on five-year performance.
Richard Moroney, CFA, Dow Theory Forecasts, dowtheory.com, 800-233-5922, May 17, 2021
VanEck Vectors Pharmaceutical ETF (PPH)| Daily Alert May 27
Although it got off to an inauspicious start in our portfolios, we’ve seen a precipitous rise in the value of the VanEck Pharmaceuticals ETF since early March. In fact, PPH was up nearly 6% since our last issue.
This is a circumstance that I suspected we would have much sooner than we did; however, sometimes in this business you are right about an idea but either too early or too late in your implementation. Well, turns out we were a bit early on PPH, but now the ETF that holds some of the biggest, and arguably best, pharmaceutical companies in the market is starting to perform as I thought it would.
If you don’t own PPH, I think it’s wise to add it to your Growth Portfolio holdings.
Jim Woods, Successful Investing, CustomerService@JimWoodsInvesting.com, 1-800-211-4766, June 2021
*Invesco High Yield Equity Dividend Achievers ETF (PEY)
Invesco High Yield Equity Dividend Achievers tracks an index of 50 stocks selected based on dividend yield, dividend growth, and other factors.
Invesco High Yield has returned 54% over the past 12-months and averaged 12% annually over three years. Invesco High Yield is currently paying a 3%+ yield.
Harry Domash, Dividend Detective, dividenddetective.com, 866-632-1593, June 2021
*Virtus LifeSci Biotech Products ETF (BBP)
Virtus LifeSci Biotech Products is a passively managed biotech ETF that weighs the portfolio selections essentially equally, as opposed to the more typical practice of weighing selections according to market capitalization.
This is an important aspect because biotech ETFs who weigh their portfolio selections essentially equally have been the best performers by far because they have larger investments in smaller biotechnology companies which are acquisition targets for large pharmaceutical companies looking for ways to revitalize their drug portfolios by
scooping up smaller companies.
Gray Cardiff, Sound Advice, soundadvice-newsletter.com, 800-825-7007, June 1, 2021
Updates 842
SELL Hologic, Inc. (HOLX) | Daily Alert May 26
Updated from WSBD 834, October 15, 2020
We are dropping Hologic from the Focus, Buy, and Long-Term Buy lists after the company posted disappointing results for the March quarter and guidance for the current quarter.
Management targets June-quarter earnings per share of $1.00 to $1.15, implying 33% to 53% growth, on revenue of $1.00 billion to $1.07 billion, good for 22% to 30% growth. That forecast fell well short of analysts’ targets of $1.81 for per-share profits and $1.29 billion for sales.
Hologic should be sold.
Richard Moroney, CFA, Dow Theory Forecasts, dowtheory.com, 800-233-5922, May 3, 2021
*JELD-WEN Holding, Inc. (JELD)
Updated from WSBD 812, December 19, 2018
We are moving Jeld-Wen Holdings (JELD) to SELL. The company is executing on its turnaround, led by the relatively new CEO. However, after our more detailed review of the company’s future prospects, the shares appear to fully discount a robust profit recovery and are trading at our price target.
Bruce Kaser, Cabot Turnaround Letter, cabotwealth.com, 978-745-5532, May 25, 2021
*ASGN Incorporated
Updated from WSBD 827, March 19, 2020
We removed ASGN from our Best Buy List and Buy List because of weak operating momentum. The staffing and technology services company now expects June-quarter earnings per share of $1.27 to $1.33.
Richard J. Moroney, CFA, Upside, upside stocks.com, 800-233-5922, June 2021
*Anglo American plc (NGLOY)
Updated from WSBD 839, March 18. 2021
Anglo American is a play on infrastructure basic materials and is also the largest producer of platinum, with about 40% of world output, and explores for diamonds, copper, platinum group metals, coal, iron, nickel, and manganese ores. This stock has been a disappointment and I’m going to move this to a sell as I look for a better play on clean tech growth. SELL.
Carl Delfeld, Cabot Explorer, cabotwealth.com, 978-745-5532, June 3, 2021
Investment Index 842
The next Wall Street’s Best Digest issue will be published on July 8, 2021.
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